Restatement of Previously Issued Financial Statements

6 Months Ended

Jun. 29, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Note 2. Restatement of Previously Issued Financial Statements

On November 18, 2013, during the review of the interim financial statements, the Company determined that the previously issued financial statements for the three month period and the six month period ending March 30, 2013 and June 29, 2013, respectively, contained in the Company’s Quarterly Reports on Form 10-Q (“ Quarterly Reports”) for the period ended March 30, 2013 (as filed with the Securities and Exchange Commission on May 10, 2013) and June 29, 2013 (as filed with the Securities and Exchange Commission on August 13, 2013), respectively, should no longer be relied upon because of certain non-cash errors in the Quarterly Reports and that those financial statements (the “Financial Statements”) would be restated to make the necessary accounting adjustments.

The financial statements filed for the three month period ended March 30, 2013 and the six month period ended June 29, 2013 contained a misstatement pertaining to the accounting treatment of the sale of the BluScience assets to NeutriSci International, Inc. (“NeutriSci”) (See Note 4). The value of the equity and the senior secured convertible note that the Company received from NeutriSci as part of the purchase price were originally accounted for at their stated values which resulted in the Company recognizing a gain on the sale of the BluScience assets. Due to the inability to make a reliably determinable estimate of the fair value of the NeutriSci equity securities and the ultimate collectability of the note received as consideration, management has determined that the proper accounting for the sale transaction is the cost recovery method. Under the cost recovery method, no gain on the sale will be recognized until the Company’s cost basis in the net assets sold has been recovered. In addition, the Company originally accounted for its investment in NeutriSci under the cost method where it has now been determined that the equity method should have been used. The Company expects all amendments and restatements to the Financial Statements affected to be non-cash in nature.

The Company has determined that the restatements of its Financial Statements resulted from a material weakness in its internal control over financial reporting, specifically related to its process and procedures related to the accounting for sale of assets in exchange for non-cash consideration. More information regarding the Company’s controls and procedures is set forth in Part I, Item 4 of this Form 10-Q/A.

The restatement adjustments to the previously issued financial statements for the six month period ended June 29, 2013 are as follows:

ChromaDex Corporation and Subsidiaries
Condensed Consolidated Balance Sheet (Unaudited)
June 29, 2013
	Previously Reported			Restatement Adjustments			As Restated
Assets
Current Assets
Cash	$	826,631		$	—		$	826,631
Trade receivables		1,186,529			—			1,186,529
Non-trade receivable		250,000			—			250,000
Note receivable, current		1,623,508			(1,623,508	)		—
Inventories		1,944,597			—			1,944,597
Prepaid expenses and other assets		436,455			—			436,455
Total current assets		6,267,720			(1,623,508	)		4,644,212
Leasehold Improvements and Equipment, net		1,012,963			—			1,012,963
Other Noncurrent Assets
Deposits		41,192			—			41,192
Note receivable, less current		779,205			(779,205	)		—
Long-term equity investment		2,678,832			(2,678,832	)		—
Long-term investment in affiliate		—			2,157,804			2,157,804
Intangible assets, net		165,561			—			165,561
Total other noncurrent assets		3,664,790			(1,300,233	)		2,364,557
Total assets	$	10,945,473		$	(2,923,741	)	$	8,021,732
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	2,152,023		$	—		$	2,152,023
Accrued expenses		711,503			—			711,503
Current maturities of capital lease obligations		110,382			—			110,382
Customer deposits and other		336,824			—			336,824
Deferred rent, current		51,743			—			51,743
Total current liabilities		3,362,475			—			3,362,475
Capital lease obligations, less current maturities		238,287			—			238,287
Deferred rent, less current		152,456			—			152,456
Stockholders' Equity
Common stock		100,807			—			100,807
Additional paid-in capital		36,329,257			—			36,329,257
Accumulated deficit		(29,237,809	)		(2,923,741	)		(32,161,550	)
Total stockholders' equity		7,192,255			(2,923,741	)		4,268,514
Total liabilities and stockholders' equity	$	10,945,473		$	(2,923,741	)	$	8,021,732

ChromaDex Corporation and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
For the Three Month Periods Ended June 29, 2013
	Previously Reported			Restatement Adjustments			As Restated
Sales	$	2,706,896		$	—		$	2,706,896
Cost of sales		1,746,158			—			1,746,158
Gross profit		960,738			—			960,738
Operating expenses:
Sales and marketing		631,559			—			631,559
General and administrative		1,342,280			—			1,342,280
Operating expenses		1,973,839			—			1,973,839
Operating loss		(1,013,101	)		—			(1,013,101	)
Nonoperating income (expense):
Interest income		31,440			(31,144	)		296
Interest expense		(8,061	)		—			(8,061	)
Nonoperating income (expenses)		23,379			(31,144	)		(7,765	)
Net loss	$	(989,722	)	$	(31,144	)	$	(1,020,866	)
Basic and Diluted net loss per common share	$	(0.01	)	$	(0.00	)	$	(0.01	)
Basic and Diluted weighted average common shares outstanding		99,833,963			—			99,833,963

ChromaDex Corporation and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
For the Six Month Period Ended June 29, 2013
	Previously Reported			Restatement Adjustments			As Restated
Sales	$	5,041,462		$	—		$	5,041,462
Cost of sales		3,407,884			—			3,407,884
Gross profit		1,633,578			—			1,633,578
Operating expenses:
Sales and marketing		1,360,983			—			1,360,983
General and administrative		2,702,181			—			2,702,181
Gain on sale of assets		(2,891,917	)		2,891,917			—
Operating expenses		1,171,247			2,891,917			4,063,164
Operating income (loss)		462,331			(2,891,917	)		(2,429,586	)
Nonoperating income (expense):
Interest income		32,324			(31,824	)		500
Interest expense		(15,852	)		—			(15,852	)
Nonoperating income (expenses)		16,472			(31,824	)		(15,352	)
Net income (loss)	$	478,803		$	(2,923,741	)	$	(2,444,938	)
Basic net income (loss) per common share	$	0.00		$	(0.03	)	$	(0.03	)
Diluted net income (loss) per common share	$	0.00		$	(0.03	)	$	(0.03	)
Basic weighted average common shares outstanding		97,230,043			—			97,230,043
Diluted weighted average common shares outstanding		97,486,066			(256,023	)		97,230,043

ChromaDex Corporation and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the Six Month Period Ended June 29, 2013
	Previously Reported			Restatement Adjustments			As Restated
Cash Flows From Operating Activities
Net income (loss)	$	478,803		$	(2,923,741	)	$	(2,444,938	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of leasehold improvements and equipment		134,325			—			134,325
Amortization of intangibles		10,621			—			10,621
Share-based compensation expense		728,349			—			728,349
Gain on sale of assets		(2,891,917	)		2,891,917			—
Interest added to note receivable		(31,824	)		31,824			—
Changes in operating assets and liabilities:					—
Trade receivables		770,994			—			770,994
Inventories		(206,824	)		—			(206,824	)
Prepaid expenses and other assets		(51,010	)		—			(51,010	)
Accounts payable		(907,337	)		—			(907,337	)
Accrued expenses		(150,095	)		—			(150,095	)
Customer deposits and other		26,557			—			26,557
Deferred rent		3,298			—			3,298
Net cash used in operating activities		(2,086,060	)		—			(2,086,060	)
Cash Flows From Investing Activities
Purchases of leasehold improvements and equipment		(39,011	)		—			(39,011	)
Purchase of intangible assets		(40,000	)		—			(40,000	)
Proceeds from sale of assets		750,000			—			750,000
Net cash provided by investing activities		670,989			—			670,989
Cash Flows From Financing Activities
Proceeds from exercise of stock options		131,769			—			131,769
Proceeds from exercise of warrants		1,638,748			—			1,638,748
Principal payments on capital leases		(48,815	)		—			(48,815	)
Net cash provided by financing activities		1,721,702			—			1,721,702
Net increase in cash		306,631			—			306,631
Cash Beginning of Period		520,000			—			520,000
Cash Ending of Period	$	826,631		$	—		$	826,631